B of A to Expand Stake in China Bank

Bank of America Corp. said it would almost double its stake in China Construction Bank Corp., ending speculation that it would dump part of its three-year-old investment in China's No. 2 bank to blunt the effects of the global financial crisis.

The Charlotte company, which raised $10 billion last month to help fund its purchase of Merrill Lynch & Co. Inc., said Monday that it is raising its China Construction stake to 19.1%, or 44.7 billion shares.

Exercising an option, B of A is to buy the shares from the state investment arm, China Safe Investments Ltd., the Beijing banking company's biggest stakeholder.

"China Construction Bank is tightly tied to the government, and they are a preferred bank," said Richard Wottrich, managing director of Dresner Partners, a Chicago investment banking firm. "China will probably return the favor someday by doing something for Bank of America if they need help."

B of A has received $15 billion from the U.S. government as part of a $250 billion package to shore up lenders and thaw the credit markets.

The company first invested in China Construction in June 2005, buying a $3 billion stake before the lender was publicly listed. By Sept. 30 the value of that stake was $14.5 billion, a regulatory filing said.

B of A said it plans to be "a long-term and significant strategic investor" in China Construction.

The shares cannot be sold until Aug. 29, 2011, without the Chinese bank's consent.

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